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Schuette opposes Blue Cross mutual insurer conversion plan

Michigan Attorney General Bill Schuette joined several consumer and seniors groups today in opposing two bills headed for approval in the state Legislature that would allow Blue Cross Blue Shield of Michigan to convert into a nonprofit mutual health insurance company.

The Michigan House today voted in favor of Senate Bills 61 and 62. The legislative package now goes to the Senate for final approval.

Schuette said the bills do not go far enough to protect seniors against rising health care prices for Medicare supplemental insurance policies.

"We need a full and complete commitment to seniors, one that protects them from the looming 'Senior Cliff,' which could cause skyrocketing Medigap rate increases for Michigan's most vulnerable," Schuette said in a statement.

"When the existing Medigap rate freeze ends in 2016, (176,000) Michigan seniors will either face higher rates or be left on their own to find new coverage if Blue Cross drops the Medigap plans. That is unacceptable, and as a result, I cannot support the legislation."

Those rates would be, on average, 66 percent higher.

In a statement to Crain's, Andy Hetzel, Blue Cross' vice president of corporate communications, said the legislation protects seniors for several years and will offer them low-cost options in the future.

"It ensures Blue Cross Medigap rates won't increase by one penny for three more years, after which the most vulnerable seniors will continue to receive subsidies," Hetzel said.

"The Michigan marketplace provides many affordable choices for Medicare beneficiaries, including numerous Medicare Advantage plans, in addition to Medigap."

One provision in the legislative package, which Gov. Rick Snyder negotiated with Blue Cross, would require the state's largest insurer to contribute $1.56 billion over 18 years to a newly formed nonprofit foundation. Some of the proceeds would be used to defray seniors' Medigap premiums.

Schuette said the foundation would subsidize Medigap premiums an average of $24 million per year for five years starting in 2016.

However, Schuette said those subsidies "will be insufficient to replace the current $180 million annual subsidy that keeps Medigap affordable for thousands of Michigan seniors."

Schuette also criticized the Blue Cross bills for not allowing the attorney general to continue to oversee future Blue Cross rate increases.

Speaker of the House Jase Bolger, R-Marshall, said Blue Cross reforms are needed to make even health insurance regulations under ObamaCare.

"They're important to taxpayers because they make the Blues pay taxes, and they're important to seniors because they add Medigap assistance," Bolger said in a statement.

Two groups opposed to the Blue Cross legislation are AARP Michigan and Michigan Consumers for Healthcare.

Michigan Consumers suggested the Blue Cross bills be amended to include a 40-day rate-review process for all insurance company rate hikes, including Blue Cross.

"These new procedures establish clear criteria for rejecting unjustified rate increases, establish a meaningful 30 day public comment period and require the Insurance Commissioner to take action on rates deemed unjustifiable," Michigan Consumers said on its website.

"This proposal levels the playing field by ensuring all insurers go through the same process without effectively abandoning rate review and allowing a functional monopoly to set insurance rates in Michigan."

For 32 years, Blue Cross has been regulated under Public Act 350 as a "charitable and benevolent" company and held in trust for the people of Michigan.

But experts contended Blue Cross' mission had to change for when the Patient Protection and Affordable Care Act, or ObamaCare, goes into full effect on Jan. 1, 2014.

Under reform, all insurers – not just Blue Cross – must offer policies to people with pre-existing health conditions.